Are you looking to buy a home, but don’t have the full amount for a traditional mortgage? A shared ownership mortgage might be the perfect solution for you.
With a shared ownership mortgage, you can buy a portion of a home and pay rent on the portion you don’t own.
This can be a great way to get into the housing market without breaking the bank.
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What Is a Shared Ownership Mortgage?
A shared ownership mortgage is a type of mortgage that allows you to buy a percentage of a property and pay rent on the rest. For example, if you buy a 50 percent share in a property with a shared ownership mortgage, you would pay rent on the other 50 percent.
Shared ownership mortgages are a great way to get on the property ladder if you can’t afford to buy a property outright. They can also make buying a property more affordable if you only need a small mortgage.
How Does a Shared Ownership Mortgage Work?
With a shared ownership mortgage, you buy a percentage of a property and pay rent on the rest. The percentage you buy can be anything from 25 percent to 75 percent. You will need to place a deposit for the percentage of the property that you’re buying.
For example, if you’re buying a 50 percent share in a property for £200,000, you would need to place a deposit of £10,000. The mortgage lender will then give you a mortgage for the other 50 percent of the property.
You will need to pay rent on the part of the property that you don’t own. The rent will be set by the housing association or landlord. The rent will usually be lower than the market rent for the property.
You can buy a larger share of the property at any time. This is called ‘staircasing’. For example, if you own a 50 percent share of a property, you could buy a further 25 percent share. This would leave you with a 75 percent share of the property.
You can also sell your share of the property at any time. This is known as the ‘right to buy.
Who Can Get a Shared Ownership Mortgage?
Shared ownership mortgages are available to first-time buyers and people who used to own their own homes. You will need to meet certain criteria to be eligible for a shared ownership mortgage.
To be eligible for a shared ownership mortgage, you must:
- Be a first-time buyer or former homeowner
- Have a household income of less than £80,000
- Be unable to afford to buy a property on the open market
- You will also need to be a UK resident and have a good credit history
What Are the Benefits of a Shared Ownership Mortgage?
There are a number of benefits to taking out a shared ownership mortgage. These include:
- You can get on the property ladder with a smaller deposit
- You can buy a property that you couldn’t afford to buy outright
- You can pay rent that is lower than the market rent for the property
- You can buy a larger share of the property at any time
- You can sell your share of the property at any time
We hope you enjoyed this article about shared ownership mortgages. If you are at all interested in buying your own home but don’t have the full amount needed for a traditional mortgage, it is well worth looking into shared ownership mortgages.
